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You are investing for retirement starting at age 25. You invest $10,000 per year. During years...

You are investing for retirement starting at age 25. You invest $10,000 per year. During years 1-30 your investments earn 15% per year.   During years 31-40 you move to more conservative estimates earning 5% per year. How much will you have saved when you retire at age 65?   Assume investments occur at the beginning of each year. What is the IRR of this investment stream? (answer is IRR=11.9%) In excel functions

Solutions

Expert Solution

Your Current Age = 25 year

You will retire at 65 year.

So you have total 40 year for saving.

Cumulative value of saving for first 30 year is calculated in excel and screen shot provided below:

Total Cumulative saving for first 30 year is $4,999,569.18.

Now, this value act as present value for next 31- 40 year. So, total saving at time of retirement is calculated in excel and screen shot provided below:

Total saving at time of retirement will be $8,275,839.25.

Now, Internal rate of return is calculated in excel and screen shot provided below:

Internal rate of return is 11.90%.

jeff jeffy answered 2 years ago
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